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Property Tax Post: Property Tax Could be the Hottest Tax Issue of 2018

The passage of federal tax reform (Pub. L. No.
115-97), and the resultant cap on the state and local tax (SALT) deduction,
has thrust state taxes into the national spotlight in a way that perhaps hasn’t
been seen for many years. State and local tax practitioners, of course, are
regularly immersed in the issues concerning sales and use taxes, state
corporate and individual income taxes, state excise taxes, and property taxes. In
late December, however, the property tax, in particular, stole the show as a
nationwide drama
played out around whether taxpayers would be able to prepay property taxes and
take advantage of the last(?) opportunity to claim an un-capped state and local
tax deduction on federal income tax returns.

The uproar over property taxes in the waning days of 2017
may have been a precursor to a lot more scrutiny of the property tax in 2018
that goes well beyond distress over capped deductions. In his final state of the
state address on Jan. 9, outgoing New Jersey Gov. Chris Christie "warned”
that property taxes will be a major concern for the state as the new governor
takes the reins.

Texas, one of the few non-income tax states, is expected to
“accelerate [its] efforts at property tax relief in 2018 in advance of the 2019
Legislature,” as reported by Bloomberg Law’s Paul Stinson in a legislative
preview (subscription required) for the Lone Star State. In Wisconsin,
retail proponents of the “dark store” theory of property valuation face limits
on using “dark property” as comparable to property that is not dark property
under pending bills S.B. 292/A.B. 386.[1]
(For a comprehensive discussion of the controversial “dark store” theory, see
the three-part
blog series by Bloomberg Tax’s Stephanie Cangialosi.)

Lawmakers working on state tax reform in Nebraska are
expected to tussle over priorities—while urban representatives see a need for
lowering corporate and individual income taxes, legislators from rural
districts are looking for property
tax relief for the “agricultural sector,” according to Bloomberg Law’s
Christopher Brown (subscription needed). And Pennsylvania’s legislature is set
to again consider the “Property Tax Independence Act” (S.B.
76), a bipartisan bill introduced several times in recent years, that is
designed to eliminate the school property tax, apparently “the
most-hated and egregious tax” among at least some of the state’s voters.[2]

Property taxes comprise 31.3 percent of state and local tax
collections in the U.S., according to the Tax
Foundation. The Council on State Taxation (COST) issued a report
last August finding that property taxes are “by far the largest state and local
tax paid by businesses,” at 38.4 percent of total state taxes paid and 76.8
percent of total local taxes paid. These figures illustrate the critical role of
property taxes as revenue for the states and localities and as a potential
burden for companies and homeowners. As state and local governments and
taxpayers alike decide how to respond in the wake of the 2017 federal tax
reform act, we may see the property tax emerge as the hottest policy issue of
the year.

For more information on the impact of Pub. L. No. 115-97,
examine Bloomberg Tax’s Tax Reform
Roadmap, showing detailed comparisons between pre-reform law and the
impending changes, with pertinent cites attached.

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